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GBP/USD Trend Line Break and Retest (May 17, 2013)
GBP/USD already broke below the rising trend line on the 4-hour time frame earlier this week, but it appears that the pair has found support around the 1.5200 major psychological level for now.
This was spurred by an upgrade in growth and inflation forecasts by the BOE, as well as stronger than expected jobs data from the United Kingdom. The economy’s jobless rate fell from 7.9% to 7.8% in April, as there were fewer individuals filing for unemployment claims in the month.
Weak U.S. data, namely inflation reports and manufacturing indices, also contributed to GBP/USD’s recent rally. However, the climb could last only until the Fibonacci retracement levels. Note that the 1.5400 major psychological resistance is between the 50% and 61.8% Fibonacci levels.
The broken trend line is also within this range, which suggests that it could act as strong resistance moving forward. Stochastic has yet to reach the overbought region so wait for a crossover and a move down before shorting.
By Kate Curtis from Trader's Way
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